China Dragon Securities has released a research report indicating that during the first half of 2026, ongoing conflicts involving the US, Israel, and Iran tightened crude oil supply, pushing oil prices sharply higher and fueling US inflation, which in turn shifted expectations for Federal Reserve policy rates. A notable short-term rise in monetary tightening expectations became the core macroeconomic constraint on precious metals, particularly gold, leading to significant price swings. For industrial metals, strong expectations around potential US copper tariffs continued to drive copper prices upward, while energy metals confirmed a turning point with substantial price gains in the period. The firm maintains a "recommended" rating for the sector.
Precious Metals: Geopolitical Turmoil and Liquidity Shocks Cause Gold Price Swings, Yet the Average Level Still Rises Markedly
Over the first six months of 2026, ongoing conflicts involving the US, Israel, and Iran led to tighter crude supply, with oil prices briefly surging past $110 per barrel. Imported inflation strengthened the persistence of US inflation, leading markets to bet on the Fed shifting from rate cuts to hikes in the latter half of the year. By late July, CME FedWatch data showed a probability exceeding 80% for a September rate hike, and these tightening expectations weighed on gold prices while amplifying their volatility. Still, compared with the same period last year, gold prices are sharply higher: the average spot gold price on the LME was $3,076.39 per ounce, up 52.41% year over year, while average spot silver was $78.47 per ounce, up 139.32%. Sector revenue reached RMB 228.72 billion, up 21.50% year over year; net profit attributable to shareholders hit RMB 15.108 billion, up 55.97%; the gross margin stood at 15.82%, up 2.30 percentage points, and ROE was 10.53%, up 2.86 percentage points, reflecting stronger profit resilience relative to revenue.
Industrial Metals: Geopolitical Frictions Cloud Global Growth Prospects, While US Tariff Expectations Propel Copper Prices Higher
Amid the conflict-driven slowdown, the IMF trimmed its 2026 global growth forecast to 3.0%, putting pressure on overseas demand. However, expectations of US copper tariffs strengthened, and the C-L spread drove transatlantic arbitrage trades, enabling copper to outperform other industrial metals. In the first half, the average LME copper price was $13,083.05 per ton, up 38.73% year over year; aluminum averaged $3,382.28 per ton, up 33.21%; lead averaged down 0.83%, while zinc rose 22.27%. Sector revenue climbed to RMB 1,788.953 billion, up 30.57% year over year; net profit attributable to shareholders jumped to RMB 143.34 billion, up 104.18%; the gross margin expanded to 16.28%, up 4.95 percentage points, and ROE reached 13.49%, up 5.22 percentage points, illustrating a pattern of stable copper, highly flexible aluminum, and a recovering lead-zinc segment.
Energy Metals: Turning Point Confirmed, Prices Rebound Strongly
For the first half of the year, the average domestic battery-grade lithium carbonate price was RMB 163,431.98 per ton, while lithium hydroxide averaged RMB 152,977.24 per ton, up 132.2% and 127.02% year over year, respectively. After the price inflection point was confirmed, the rebound was pronounced. Sector revenue totaled RMB 120.665 billion, up 83.49% year over year; net profit attributable to shareholders surged 566.95% to RMB 16.352 billion, roughly 1.7 times the full-year 2025 figure; the gross margin reached 28.37%, up 11.70 percentage points, and ROE was 9.00%, up 6.83 percentage points. Among sub-sectors, lithium revenue rose 154.0% with profits swinging sharply into positive territory, cobalt revenue was up 49.4% with profits up 35.7%, and nickel remains small in scale. The sector has transitioned from bottoming to a phase of tangible recovery.
Outlook and Strategy
Despite lingering expectations for rate hikes, geopolitical conditions remain unstable and long-term growth faces ongoing uncertainty, positioning gold as an attractive allocation option. Meanwhile, with copper tariff expectations fluctuating, industrial metals may see periods of choppy trading.
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